A business organization produces goods or services, such as tangible products like phones, cars, and chocolate, as well as intangible services like insurance, haircuts, and car repairs. Businesses exist to satisfy the needs of customers, make money, provide employment, and create goods and services. They do so by adding value. Business activity isn't always about making a profit; there are not-for-profit organizations that make money but give their profits to those in need. Additionally, there is a public sector funded mainly by taxes collected by the government, including the NHS, education, police, and BBC.
The role of the entrepreneur involves spotting an opportunity, developing a business idea, and satisfying the needs of customers. The characteristics of an entrepreneur include creativity to come up with ideas, risk-taking by risking their money and time, determination as starting a business requires hard work and self-motivation, and confidence as without it, they wouldn't be brave enough to start their business.
The concept of risk and reward is essential as entrepreneurs take risks by potentially risking their money, health, and relationships. However, there are potentially great rewards such as keeping all the profits, making decisions, and being the boss.
Business planning involves creating a formal document outlining a company's goals and helping attract funding. It includes objectives that state what a business would like to achieve and the target market, which is a group of customers the business has decided to sell to and the long-term goals of targeting that market. The purpose of planning business activity is to reduce risk and help a business succeed by having clear plans, aims, and objectives.
A business plan includes the business idea, the people running the business, market research to determine if the idea will succeed, finance needed to start, and the target market.
Unincorporated Businesses such as sole traders and partnerships have features like unlimited liability, income tax on profits, continuity, and private financial information. Bankruptcy occurs when the business can't pay its debts.
Incorporated businesses like private limited companies (Ltd) and public limited companies (Plc) have features like limited liability, corporation tax on profits, being a separate legal entity from its owners, and the ability to raise finances through the sale of shares.
Sole traders are easy to set up, controlled by one person, and all profits go to the owner. However, they have unlimited liability and it's hard to raise money due to a skills shortage.
Partnerships allow the workload to be shared among partners and are easy to set up. However, they also come with unlimited liability and continuity issues.
Private limited companies have limited liability and the ability to sell shares, yet lack capital because shares can't be sold to the public, and their financial information is made public.
Public limited companies can sell shares on the stock market, have limited liability, and can raise large amounts of capital, but their financial information is also made public, and they can become too large resulting in bureaucracy.
Business objectives are what the business is trying to achieve, such as increasing profits, expanding the customer base, or improving product quality. Different businesses will have different objectives based on their size, industry, and other factors.
